Free personalized report
Want this guide applied to your situation?
Start a personal annuity report using your age, state, and amount. Keep reading for the full guide.
How Annuities Can Anchor Your Portfolio During 2025’s Market Volatility
Market volatility is nothing new, but 2025 is shaping up to be especially unpredictable. With global elections, shifting Federal Reserve policies, and ongoing geopolitical tensions, investors are bracing for another year of market swings. For retirees and pre-retirees, the stakes are high. That’s where annuities often misunderstood or overlooked can play a stabilizing role.
Why Volatility Is Dangerous in Retirement
When markets decline early in retirement, the combination of withdrawals and investment losses can irreparably damage a portfolio’s longevity. Known as “sequence of returns” risk, this challenge becomes more severe when retirees are forced to sell assets at a loss just to meet income needs.
The Role of Annuities
Annuities can serve as a portfolio’s ballast offering income stability, principal protection, or defined growth during uncertain times. Here’s how different types of annuities provide unique benefits in volatile markets:
1. Fixed Annuities (e.g., MYGAs) These annuities offer guaranteed rates for a set period, regardless of market performance. In 2025, with interest rates still relatively high, MYGAs are especially appealing to risk-averse investors looking to lock in multi-year income.
2. Fixed Indexed Annuities (FIAs) FIAs provide principal protection while offering market-linked growth with caps or participation rates. In a volatile environment, they allow investors to benefit from market rebounds without the risk of loss during downturns.
Free personalized report
Put this guide to work for your situation
Compare annuity options using your age, state, and investment amount, then get a personal report you can review alongside this guide.
3. Variable Annuities (VAs) with Income Riders For those comfortable with market exposure but needing predictable income, VAs with income riders offer growth potential along with future income guarantees even if the market underperforms.
Real-World Example Consider David and Laura, both 68, who retired in early 2024. They allocated 60% of their portfolio to equities and 40% to bonds. By Q2 2025, a global downturn reduces their equity holdings by 20%. They need $4,000 per month in income but are hesitant to sell stocks at a loss. Had they allocated $300,000 to an FIA offering up to 6% indexed returns with no downside risk, they could have generated $18,000–$20,000 per year in income reducing the need to withdraw from their declining equity assets.
The Behavioral Advantage
Market volatility often triggers panic selling and emotional decision-making, which can derail even the best investment strategies. Annuities help investors stay disciplined by offering peace of mind and income certainty. That behavioral advantage can make a meaningful long-term difference.
Blending Annuities with Traditional Portfolios
More financial planners are incorporating annuities into holistic retirement strategies:
- Fixed annuities can act as bond replacements.
- FIAs offer market-linked upside with no downside risk.
- VAs fill the growth-and-income gap for clients with higher risk tolerance.
By allocating 20–40% of a retirement portfolio to annuity-based income sources, advisors can reduce sequence risk, limit volatility, and improve overall plan resilience.
What Advisors Should Do
- Review portfolio risk exposure by age group.
- Segment income needs into early vs. late retirement and match them with suitable annuity types.
- Present annuities not as alternatives to investing, but as complements to volatility-sensitive plans.
Volatility may be inevitable, but chaos in your retirement income strategy doesn’t have to be. Annuities provide a much-needed anchor for stormy financial waters in 2025.
Coming Up Next: How the ‘Peak 65’ retirement wave is reshaping the annuity marketplace
Related on AnnuityRatesHQ